2021 (9) TMI 1505 - HC - GST

Non-inclusion of component of tax for GST at the time of quoting the tender - Petitioner contends that when the bill was submitted, respondents refused to pay the component of GST - HELD THAT - The notice inviting tender produced as Ext. P1 is specific to the work in question. The mind of the employer in a contract is made evident through the notice inviting tender. Though the notice inviting tender is not by itself binding upon the parties, when the said document is acted upon by another party to the contract there arises certain binding obligations, based purely upon the terms specified in Ext. P1. De hors what happened before or after, the terms in Ext. P1 are required to be abided with. The bidders cannot vary or detract from the terms specified in that document. Viewed in the above perspective, irrespective of the Government order issued as G.O. (P) No. 2/2018/PWD dated 27.01.2018, if the 2nd respondent proceeded with the tender in question, incorporating specific terms that the bids must quote rates 'except' GST in Clause 3.3.3 as extracted earlier, it cannot be gainsaid later, by the employer to the contract, that the bids ought to have quoted rates including GST. It needs no elaboration to conclude that the said terms except goods and service tax being specific to the contract in question must govern the terms and conditions of the contract. It is apposite to refer to the judgment cited by the learned counsel for the petitioner in Writ Appeal No. 445 of 2018 dated 18.12.2019. The said decision is reported as C.A. George V. State of Kerala and Others 2019 (12) TMI 1655 - KERALA HIGH COURT . Though the situation in the abovesaid case was slightly different, the issue considered by the Court was whether the petitioner in that case was called upon to give the bid amount without the taxes or as exclusive of the taxes. After referring to the issues involved therein it was held by this Court that the conditions of the notice inviting tender by itself does not amount to a contract. A contract comes into existence only when the price quoted by the contractor is accepted by the department. In the document which provides for the price bid, when there is clear instruction that the price should be without taxes, the bidder cannot be blamed for having not incorporated the tax element in the bid document. The claim of the writ petitioner is justifiable and Ext. P9 is contrary to the settled propositions of law - It is declared that the terms and conditions contained in Ext. P1 shall govern contract for the work titled NABARD RIDF XXII Infrastructural works in Kurinjikkal Construction of Bridge across Puzhakkalthodu and set aside Ext. P9 - It is also held that petitioner was not bound to include GST in the bid quoted by him pursuant to Ext. P1 NIT. Petition allowed.

Summary

Issues:
Interpretation of Clause 3.3.3 in the Notice Inviting Tender (NIT) regarding the inclusion of Goods and Service Tax (GST) component in the bid amount.

Analysis:
1. The petitioner bid for a construction work based on a tender where the NIT specified that the rates quoted should exclude GST, as per Clause 3.3.3. The petitioner contended that since the tender document did not require the inclusion of GST and the Bill of Quantities (BoQ) template also specified prices "without taxes," the GST component was not included in the bid amount.

2. The respondents refused to pay the GST component claimed by the petitioner, citing a government circular and the statutory obligation of the contractor to pay GST. The respondents argued that all other bidders had included GST in their bids, and the petitioner's bid would have been lower if GST was included. A specific government order directed that the contractor must pay GST directly and that the government does not provide GST beyond the contract amount.

3. The Court emphasized that the terms specified in the NIT, including the exclusion of GST in the bid rates, must be adhered to by the parties involved in the contract. The Court noted that the BoQ template and the terms of the NIT were aligned in not requiring the inclusion of GST in the bid amount, ensuring a level playing field for all bidders.

4. Referring to a previous judgment, the Court clarified that when a tender document specifies prices "without taxes," the bidder cannot be faulted for not incorporating the tax element in the bid. The Court also rejected the argument that the estimate prepared by the respondents, which included GST, should bind the bidders, as the terms of the NIT were paramount in governing the contract.

5. The Court held that since the NIT explicitly stated "except goods and service tax," the petitioner was not obligated to include GST in the bid amount. The Court also dismissed the argument that other contractors included GST in their bids, emphasizing that each contractor must adhere to the specific terms of the contract they bid for.

6. Consequently, the Court declared that the terms of the NIT governed the contract and set aside the decision of the respondents to decline the GST component in the bills raised by the petitioner. The Court directed the respondents to pay the GST component against the bills raised by the petitioner within three months from the date of the judgment.